Cowan, T., Da Silva Rosa, R. & Walter, T.S. 2004, The Demutualisation of the Australian Stock Exchange: Causes and Consequences, November 2004, SAI Global Ltd, Sydney, Australia.
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Brown, P.R. & Walter, T.S. 2013, 'The CAPM: Theoretical validity, empirical intractability and practical applications', Abacus, vol. 49, no. S1, pp. 44-50.

Dou, Y., Gallagher, D.R., Schneider, D. & Walter, T.S. 2012, 'Out-of-sample stock return predictability in Australia', Australian Journal of Management, vol. 37, no. 3, pp. 461-479.
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We provide one of the first comprehensive studies on out-of-sample stock returns predictability in Australia. While most of the empirically well-known predictive variables fail to generate out-of-sample predictability, we document a significant out-of-sample prediction in forecasting ahead one-year and, to a lesser extent, one-quarter future excess returns, using a combination forecast of variables. We also find improved asset allocation using the combination forecast of these predictors. The combining methods are useful in predicting sector premia. Specifically, a sector rotation strategy relying on the combining methods outperforms the market by 3.27% per annum on a risk-adjusted basis.

Walter, T.S. & Corones, Z. 2012, 'Open And Closed Analyst Briefings: An Intraday Perspective', Jassa-the Finsia Journal Of Applied Finance, vol. 2, no. 2, pp. 26-34.
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This study examines the role of analyst briefings in the Australian share market, an area that has come under increased regulatory scrutiny. We identify the population of disclosed analyst briefings between 7999 and 2008, and analyse intraday ASX pricing

Al-Yahyaee, K., Pham, T.M. & Walter, T.S. 2011, 'Dividend smoothing when firms distribute most of their earnings as dividends', Applied Financial Economics, vol. 21, no. 16, pp. 1175-1183.
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Due to its distinctive institutional background, Oman offers a valuable opportunity to investigate the stability of the dividend policy. In Oman, (1) there are no taxes on dividends, (2) firms are highly levered mainly through bank loans, (3) there is a high concentration of stock ownership and (4) there is variability in cash dividend payments. These factors suggest a diminished role of dividend smoothing in Oman. Our results show that Omani financial firms have erratic dividend policies. These results are inconsistent with the predictions suggested by the relatively weak corporate governance, government ownership and dividend signalling.

Al-Yahyaee, K., Pham, T.M. & Walter, T.S. 2011, 'The information content of cash dividend announcements in a unique environment', Journal of Banking and Finance, vol. 35, no. 3, pp. 606-612.
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Due to its distinctive institutional background, Oman offers a valuable opportunity to examine stock price reactions to dividend announcements. In Oman, (1) there are no taxes on dividends and capital gains, (2) there is a high concentration of share ownership, (3) there is low corporate transparency, and (4) firms frequently change their dividends. Our results show that announcements of dividend increases are associated with increased stock prices, while announcements of dividend decreases cause decreases in stock prices. Firms that do not change their dividends experience insignificant negative returns. These results contradict tax-based signaling models, which argue that higher taxes on dividends relative to capital gains are a necessary condition for dividends to be informative.

Comerton-Forde, C., Gallagher, D.R., Lai, J. & Walter, T.S. 2011, 'Broker recommendations and Australian small-cap equity fund management', Accounting & Finance, vol. 51, no. 4, pp. 893-922.
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This study examines whether the abnormal performance of active Australian small-cap equity fund managers is associated with broker recommendations. Our evidence supports the investment value of broker recommendations, showing significant abnormal returns (ARs) both pre- and post-broker recommendations. We find that when a factor-mimicking portfolio based on broker recommendations is added to a Carhart (1997) model, annual alphas are reduced by 48 basis points. Using transaction-level data, buy trades following broker recommendations earn significant cumulative ARs of 1.56 per cent after 60 days. Overall, we find that broker recommendations account for an economically significant component of alphas

Al-Yahyaee, K., Pham, T.M. & Walter, T.S. 2010, 'Dividend stability in a unique environment', Managerial Finance, vol. 36, no. 10, pp. 903-916.
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Purpose + This paper aims to examine the stability of dividend policy using a unique data set. Design/methodology/approach + The paper is based on the Lintner model that is used to test the dividend smoothing behavior. The specific econometric method used for panel data is Tobit regression. Findings + The evidence shows that Omani firms adopt a policy of smoothing dividends. This stability of dividends does not support the predictions suggested by the high bank leverage, absence of taxes, and the variability of dividend payments in Oman. Research limitations/implications + This study highlights the need for further research in order to examine whether these results have any effect on dividend initiations and omissions in Oman. Practical implications + The findings of this study show that there are differences in dividend policies between the Omani companies and those in developed markets. Potential investors in the Omani market should be aware about these differences in making their investment decisions. Originality/value + This paper examines stability of dividend policy in a unique environment where firms distribute almost 100 percent of their profits in dividends, firms are highly levered mainly through bank loans, there are no taxes on dividends and capital gains, and there is variability in cash dividend payments. These factors suggest a diminished role of dividend stability in Oman. It is an empirical issue to examine whether this is indeed true. The authors are not aware of any other study on dividend stability using data with these unique factors.

Chen, C., Comerton-Forde, C., Gallagher, D.R. & Walter, T.S. 2010, 'Investment manager skill in small-cap equities', Australian Journal of Management, vol. 35, no. 1, pp. 23-49.
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Using a representative sample of monthly portfolio holdings and daily trades, this study presents unique evidence of significant stock selection skill amongst institutional small-cap equity managers on a risk-adjusted basis. Of particular importance is the magnitude of the performance generated by fund managers in our sample. Aggregate four-factor and five-factor alphas are 68 and 59.6 basis points per month before management expenses and tax, respectively. The evidence from holdings and transaction-based metrics of performance also reveals that small-cap equity managers possess superior stock selection ability, from both a statistical and economic perspective. Our results are robust to the deduction of transaction costs. Our research provides important non-U.S. evidence concerning the value of active management, in a market segment which exhibits both lower liquidity and lower analyst coverage

Comerton-Forde, C., Gallagher, D.R., Nahhas, J. & Walter, T.S. 2010, 'Transaction costs and institutional trading in small-cap equity funds', Australian Journal of Management, vol. 35, no. 3, pp. 313-327.
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This paper examines the magnitude and determinants of trading costs for small-cap funds in Australia. The total price impact for these funds is 0.99% (+0.34%) for purchases (sales). This is considerably larger than costs reported in prior literature. Both purchases and sales exhibit price continuations after the trade package, consistent with an information effect. Although we do not observe the directional asymmetry typically shown in the literature, the magnitude of the total and permanent effects for purchases is larger than for sales. We also show that price impact is related to fund inflows and outflows.

Chan, P.T., Edwards, V. & Walter, T.S. 2009, 'The information content of Australian credit ratings: A comparison between subscription and non-subscription credit rating agencies', Economic Systems, vol. 33, no. 1, pp. 22-44.
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We classify credit rating agencies into two groups: subscribing and non-subscribing. Investors can access (non-subscribing) credit reports released to the public for no charge, or investors can subscribe to the fee-paying (subscribing) credit reports from agencies. Our results suggest that the information content of non-subscribing credit agencies is very low, whereas positive excess returns exist up to eight months after the announcement of credit upgrades from the subscription-only agencies. We support the hypothesis proposed in Grossman and Stiglitz [Grossman, S.J., Stiglitz, J.E., 1976. Information and competitive price systems. The American Economic Review 66, 246+253; Grossman, S.J., Stiglitz, J.E., 1980. On the impossibility of informationally efficient markets. The American Economic Review 70, 393+408]. Investors who spend resources on information acquisition should receive compensation for their information advantage, or there would be no incentive for such activity.

Al-Yahyee, K., Pham, T.M. & Walter, T.S. 2008, 'Ex-Dividend Day Behaviour in the Absence of Taxes and Price Discreteness', International Review of Finance, vol. 8, no. 3-4, pp. 103-123.
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We examine the ex-dividend day behavior in a unique setting where (1) there are neither taxes on dividends nor on capital gains, (2) stock prices have been decimalized, (3) dividends are distributed annually, and (4) we have data that enable us to examine bid-ask bounce effects. In this economy, any price decline that is smaller than the dividends cannot be attributed to taxes and price discreteness. Like previous studies, we find that the stock price drops by less than the amount of dividends and there is a significant positive ex-day return. By examining abnormal volumes around the ex-dividend day, we find no evidence of short-term trading. We are able to account for our results using market microstructure models. When the impact of market microstructure is taken into account, the ex-dividend drop is not significantly different from the value of the dividend paid.

Calwell, D., Henker, J. & Walter, T.S. 2008, 'The Effect of Investor Category Trading Imbalances on Stock Returns', International Review of Finance, vol. 8, no. 3-4, pp. 179-206.
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Trading is the mechanism of the economist's `invisible hand,' the means by which price discovery occurs. We use daily shareholdings data from the Australian equities clearinghouse to investigate the impact of the trading imbalances of investor categories on stock returns. Our evidence does not contradict the behavioral finance assumption that the trading of individual investors contributes to price discovery. Furthermore, we find that, while the trading of all investor categories Granger-causes returns, returns Granger-cause trading only for the individual investor category. That is, in the short term of up to 1 month, only individual investors engage in feedback trading.

Oh, N.Y., Parwada, J.T. & Walter, T.S. 2008, 'Investors' trading behavior and performance: Online versus non-online equity trading in Korea', Pacific-Basin Finance Journal, vol. 16, pp. 26-43.
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This paper investigates the trading behavior and performance of online equity investors in comparison to non-online equity investors in Korea. While online trading has become more prevalent in financial markets, the role of online investors and their impact on prices has attracted little empirical scrutiny. We study the trading activity of foreign investors, local institutions and individual traders between 2001 and 2005 and compare their performance based on whether or not trading is performed online. Our main finding is that in aggregate, online investors perform poorly in comparison to non-online investors. Between investor-types, foreigners show the best returns, followed by local institutions. Individual investors provide liquidity to other investor-types, particularly when trading online. On balance, the main implication of our findings is that the disadvantage suffered by individual investors is mainly explained by their online trades.

Walter, T.S., Yawson, A. & Yeung, C.P. 2008, 'The role of investment banks in M&A transactions: Fees and services', Pacific-Basin Finance Journal, vol. 16, pp. 341-369.
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We examine the pricing and performance of advisers in M&A transactions. We determine adviser quality on the basis of a contemporaneous market share measure and show that high quality advisers receive higher M&A advisory fees. High quality advisers also complete deals faster, but their superiority is not reflected in increasing the likelihood of deal completion or delivering greater abnormal equity returns to their clients. It is well known that stock bids are received more negatively than cash bids, so we further partition the sample of acquirers by consideration type and examine the abnormal returns of each partition. We find that high quality investment banks are able to differentiate themselves by delivering greater abnormal returns to their acquirer clients in deals involving stock.

Bayley, L., Lee, P.J. & Walter, T.S. 2006, 'IPO flipping in Australia: Cross-sectional explanations', Pacific-Basin Finance Journal, vol. 14, no. 4, pp. 327-348.
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We access electronic share settlement records for each subscriber and aftermarket investor in 419 Australian IPOs to investigate whether initial subscribers flip their allocations, and we relate this flipping behaviour to issuer, shareholder, underwriter and market characteristics. We find that the main determinants are underpricing (consistent with the disposition effect, i.e., a tendency to realise gains before losses), whether the IPO market is +hot+ (a proxy for the representativeness heuristic) and ex ante risk characteristics. When flipping is analysed separately for underpriced and overpriced IPOs we find that the most overpriced IPOs are flipped more than the less overpriced ones, a result which contrasts the disposition effect. This result is due to the action of institutional, rather than individual, investors. We also relate flipping activity to the firm's long-run return, and find that the flipping behaviour of large (informed) investors is unrelated to long-run returns, while uninformed investors consistently flip more of the IPOs that have better long-run returns.

Brown, P.R., Chappel, N., Da Silva Rosa, R. & Walter, T.S. 2006, 'The reach of the disposition effect: Large sample evidence across investor classes', International Review of Finance, vol. 6, no. 1-2, pp. 43-78.
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e examine detailed daily Australian Stock Exchange share registry data for investors in IPO and index stocks between 1995 and 2000 and find that the `disposition effect,+ investors' reluctance to crystallize losses and relative eagerness to realize gains, is pervasive across investor classes. However, traders instigating larger investments tend to be affected less by the disposition bias. Our novel findings include that (a) the disposition effect ameliorates over time, being undetectable from around 200 trading days after purchase, (b) the `house money+ effect tempers the disposition effect, (c) shareholder loyalty schemes also partially offset investors' relative preference for selling winning stocks, and (d) the reversal of the disposition effect in June (the last month of the Australian tax year) does not occur among investors unable to take advantage of tax shields. In line with earlier research, our results support a tax-related explanation for the June effect rather than window dressing or momentum explanations. Finally, we confirm Odean's finding that the disposition effect is not driven by diversification motives, or by higher transaction costs associated with lower-priced stocks.

Bugeja, M., Da Silva Rosa, R. & Walter, T.S. 2005, 'Expert reports in Australian takeovers: Fees and quality', Abacus: a journal of accounting, finance and business studies, vol. 41, no. 3, pp. 307-322.
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Target firms in Australian takeovers are required to commission the preparation of an independent expert report in circumstances where there is a perceived conflict of interest with the bidder. As approximately half of these reports are prepared by firms with which the target has other business dealings, concern has been expressed over the quality of these reports due to the suggestion that such reports are provided at lower fees. We examine the 191 independent expert reports provided in all 649 Australian takeover bids initiated in the period 1990 to 2000 inclusive. Using an expert-fee model, we find that the fees for reports by experts with other business dealings with the target are not lower than those of unrelated experts. In addition, the results indicate that experts with other dealings with the target provide reports with a significantly smaller valuation range, consistent with these reports being of higher, rather than lower, quality. Our findings are inconsistent with the U.S. and New Zealand experience of prohibiting audit firms from providing valuation advice in takeovers.

Da Silva Rosa, R., Saverimuttu, N. & Walter, T.S. 2005, 'Do informed traders win? An analysis of changes in corporate ownership around substantial shareholder notices', International Review of Finance, vol. 5, no. 3-4, pp. 113-148.
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The financial economics literature typically distinguishes between two classes of investors, namely `informed+ and `uninformed+ traders. Informed traders are those who possess some fundamental information about the true value of an asset, which is not readily available to other traders. Presuming that this information advantage is obtained from costly information search there is a general assumption that these traders realize superior returns. Unlike previous researchers, we access a unique panel of institutional and retail ownership (Clearing House Electronic Subregister System, CHESS records) that enable us to develop powerful measures that capture and benchmark abnormal changes in the share register across a number of dimensions. We find some evidence of a positive and significant relationship between the level of informed trading in the share register and abnormal market performance. However, our results suggest that informed traders move in and out of the share register in response to abnormal market performance, rather than in anticipation of abnormal market performance.

Balatbat, M., Taylor, S.L. & Walter, T.S. 2004, 'Corporate governance, insider ownership and operating performance of Australian initial public offerings', Accounting and Finance, vol. 44, no. 3, pp. 299-328.
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We examine ownership structures and corporate governance attributes of 313 Australian initial public offerings (IPOs) between 1976 and 1993 and their relation with up to 5 years of post-listing operating performance, adjusted for similar (non-IPO) firms. Consistent with prior share price-based evidence, we find that the operating performance of Australian IPOs typically deteriorates over the first 4 post-listing years. Any evidence of a positive association between insider ownership and firm performance is confined to the fourth and fifth years after the IPO. Evidence of a positive relation between institutional ownership and performance is restricted to the latter part of our 5-year post-listing window. Board composition (i.e. outsider versus insider control) is not associated with operating performance, although there is some evidence that independent board leadership is associated with better operating performance.

Da Silva Rosa, R., Lee, P.J., Skott, M. & Walter, T.S. 2004, 'Competition in the market for takeover advisers', Australian Journal of Management, vol. 29, no. Special, pp. 61-92.
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We investigate factors that motivate bidders to engage advisers, we model adviser selection and we test whether value-adding advisers gain market share. Our sample includes 801 attempted takeovers over 1989-1998 in Australia. Our results indicate advisers are likely to be engaged if the takeover deal is large, hostile, and includes non-cash compensation. We find deal completion is not as closely correlated with adviser rankings as does Rau (2000) but we confirm his finding that adviser ranked high on market value of deals advised do not have a comparative advantage in adding value to firms. However, we document some (limited) evidence that value- adding advisers achieve an increase in subsequent deal flow. Our results are consistent with specialization among takeover advisers.

Da Silva Rosa, R., Nguyen, T. & Walter, T.S. 2004, 'Market returns to acquirers of substantial assets', Australian Journal of Management, vol. 29, no. Special, pp. 111-134.
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Does poor post-acquisition performance characterise firms that make non-M&A acquisitions? We investigate the wealth effects of substantial asset acquisitions (i.e. acquisitions that cost over $10 million) on acquiring firms' shareholders. We find significant abnormal positive market reaction to asset acquisition announcements and, contrary to findings for firms undertaking M&As, the acquiring firms perform exceptionally well post-acquisition. Our findings are robust to the research method weaknesses common to many studies of long-term performance and we control for free-cash-flow as well. Our results contradict the hubris hypothesis of acquisitions and lend weight to the argument that the auction-style process that characterizes corporate takeover bids contributes to overpayment.

Demir, I., Muthuswamy, J. & Walter, T.S. 2004, 'Momentum returns in Australian equities: The influences of size, risk, liquidity and return computation', Pacific-Basin Finance Journal, vol. 12, no. 2, pp. 143-158.
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The apparent predictability of stock prices, and the related profitability of investment strategies based on this, has generated a great deal of research. Since the late 1980s, momentum strategies have attracted considerable attention and have been found to be profitable in numerous markets. This paper investigates the returns to short-term and intermediate-horizon momentum strategies in the Australian equity market. We focus on `practical+ or `realistic+ investment strategies, and find that momentum is prevalent in the Australian market and that the returns are of greater magnitude than previously found in overseas markets. These momentum strategy returns are robust to risk adjustment and prevail over time. We also examine the interaction of momentum on size and liquidity variables and conclude that the observed profits to these investment strategies are not explained by size or liquidity differences among the stocks.

Da Silva Rosa, R., Velayuthen, G. & Walter, T.S. 2003, 'The sharemarket performance of Australian venture capital-backed and non-venture capital-backed IPOs', Pacific-Basin Finance Journal, vol. 11, no. 2, pp. 197-218.
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We assess the initial underpricing and long-run share performance of venture capital (VC)-backed IPOs. We find, as expected, that estimates of underpricing are less severe using Habib and Ljungqvist [Economics Letters 61 (1998) 381] inspired measures that more accurately estimate the true wealth loss to the entrepreneur. However, we find no statistically significant difference in the underpricing of VC backed and non-VC backed IPOs. Further, unlike Lee et al. [Journal of Banking and Finance 20 (1996) 1189], we find that Australian IPOs do not underperform in the after-market. Non-VC capital-backed and VC-backed firms earn normal returns in the 2 years following listing. Our results are inconsistent with the hypothesis that VC-backed IPOs are certified as high quality by mere virtue of being backed by venture capitalists.

Lee, P.J., Stokes, D., Taylor, S.L. & Walter, T.S. 2003, 'The association between audit quality, accounting disclosures and firm-specific risk: evidence from initial public offerings', Journal of Accounting and Public Policy, vol. 22, no. 5, pp. 377-400.
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Frino, A., McCorry, M. & Walter, T.S. 2002, 'An analysis of intraday patterns in effective bid-ask spreads for NYSE-listed stocks', International Quarterly Journal of Finance, vol. 2, no. 1-4, pp. 85-94.

Da Silva Rosa, R., Izan, H., Steinbeck, A. & Walter, T.S. 2000, 'The method of payment decision in Australian takeovers: An Iivestigation of causes and effects', Australian Journal of Management, vol. 25, no. 1, pp. 67-94.

Frino, A., Walter, T.S. & West, A. 2000, 'The lead-lag relationship between equities and stock index futures markets around information releases', Journal of Futures Markets, vol. 20, no. 5, pp. 467-487.

Brown, P.R., Taylor, S.L. & Walter, T.S. 1999, 'The impact of statutory sanctions on the level and information content of voluntary corporate disclosure', Abacus: a journal of accounting, finance and business studies, vol. 35, no. 2, pp. 138-162.
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This article examines the effect of statutory civil and criminal sanctions on voluntary corporate disclosures by firms listed on the Australian Stock Exchange (ASX). Apart from direct investigation of the quantity of voluntary disclosure, we also investigate several possible consequences of altered corporate disclosure policies, namely properties of analysts' forecasts, the degree to which share prices anticipate the information content of periodic earnings reports, and the relationship between volatility and corporate disclosures. Results suggest that, post-sanctions, any increase in voluntary disclosure is confined to smaller firms and those which performed relatively poorly. Moreover, analysts' earnings forecasts did not become more accurate or less diverse following the introduction of statutory sanctions, and there was no statistically significant increase in the weight placed on each disclosure's ability to explain return volatility. There is some evidence that share prices have anticipated earlier the value relevant components of annual periodic accounting data, although this result is again confined to smaller firms. Although the tests used are not independent and have a limited time period post-sanctions, the results cast doubt on the extent to which the imposition of substantive civil or criminal sanctions affects corporate disclosure policy.

Lee, P.J., Taylor, S.L. & Walter, T.S. 1999, 'IPO underpricing explanations: Implications from investor application allocation schedules', Journal of Financial and Quantitative Analysis, vol. 34, no. 4, pp. 425-444.

Aitken, M., Brown, P.R., Buckland, C., Izan, H. & Walter, T.S. 1996, 'Price clustering on the Australian Stock Exchange', Pacific-Basin Finance Journal, vol. 4, no. 2-3, pp. 297-314.

Lee, P.J., Taylor, S.L. & Walter, T.S. 1996, 'Australian IPO pricing in the short and long run', Journal of Banking and Finance, vol. 20, pp. 1189-1210.
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We analyse both initial underpricing and post-listing returns for Australian IPOs. Our results are consistent with the view that unique institutional characteristics may have overwhelmed previous Australian tests of equilibrium models of IPO underpricing. The results also show that Australian IPOs significantly underperform market movements in the three-year period subsequent to listing. Further investigation of these anomalous post-listing returns lead us to reject various `speculative bubble+ explanations. Rather, the evidence suggests a curvilinear relationship between initial and subsequent returns, although the economic significance of the relationship is low.

Lee, P.J., Taylor, S.L. & Walter, T.S. 1996, 'Expected and realised returns of Singaporean IPOs: Initial and long run analysis', Pacific-Basin Finance Journal, vol. 4, pp. 153-180.

Aitken, M., Kua, A., Brown, P.R., Walter, T.S. & Izan, H. 1995, 'An intraday analysis of the probability of trading on the ASX at the asking price', Australian Journal of Management, vol. 20, no. 2, pp. 115-154.

Bugeja, M. & Walter, T.S. 1995, 'An empirical analysis of some determinants of the target shareholder premium in takeovers', Accounting and Finance, vol. 35, no. 2, pp. 33-60.
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While a considerable amount of research in Australia, the United States and elsewhere shows that takeovers create value for target shareholders, there is relatively little research investigating the explanations for cross-sectional differences in the size of the premium paid to target shareholders. This paper tests various arguments proposed to explain some of the sources of this premium. One such explanation is the removal of inefficient target management. Takeovers have been recognised as a mechanism that allows management teams to compete for the right to manage corporate assets. We test the associations between bidder and target managerial ownership (proxied by director's holdings), the prior performance of the bidder and target and the size of the premium paid to target shareholders. Other potential influences on the premium include a reduction in the agency costs of free cash flow and the provision of financial slack or reserve borrowing capacity to the target firm by the bidder. Using a sample of seventy-eight Australian takeovers occurring between 1981 and 1989 our tests indicate that the provision of financial slack to the target is associated with a significantly higher premium, while high bidder ownership results in a significantly lower premium. The premium is found to be positively related to the performance of the bidder in the period prior to the bid. The tests disclose an association between the agency costs of free cash flow and the target premium which is inconsistent with the theory, and reveal only weak evidence that the takeover premium is higher when inefficient target management is removed.

Brown, P.R., Lee, M., Owen, S. & Walter, T.S. 2009, 'Corporate governance and the long-run performance of firms issuing seasoned equity: An Australian study', Accounting and Finance Association of Australia and New Zealand Conference, Adelaide, Australia, September 2009 in AFAANZ 2009 Proceedings website, ed NA, AFAANZ, Australia, pp. 1-41.
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Corporate governance has been propelled to the forefront of contemporary business thinking by a string of high profile corporate collapses and dramatic regulatory responses in the United States, Australia and in other countries as well. A particularly extensive body of research has emerged surrounding the relationship between corporate governance and firm performance. We combine the governance literature with evidence on the long-term underperformance of firms issuing seasoned equity to examine the benefits of corporate governance in a setting where it is more likely to matter. That is, we address the question, +Does good corporate governance mitigate post-issue underperformance?+ For a broad sample of Australian seasoned equity offerings and employing a comprehensive, self-constructed governance database, we first demonstrate that issuing firms substantially underperform a variety of benchmarks over the long term, confirming similar findings in the existing literature. We then find evidence that better-governed firms do not experience the same degree of post-issue underperformance. Our findings, which are robust to a variety of estimation methods and econometric specifications, are consistent with the windows of opportunity hypothesis and with equity raisings being an important channel through which better corporate governance can improve future performance.

Shan, Y., Taylor, S.L., Walter, T.S. 2009, 'Errors in estimating unexpected accruals in the presence of large changes in net external financing', Accounting and Finance Association of Australia and New Zealand Conference, Adelaide, Australia, July 2009 in 2009 AFAANZ Conference, ed Faff, R, AFAANZ, Australia, pp. 1-54.
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We demonstrate that the articulation among accruals, cash flows and revenues which is typically assumed in tests of earnings management does not hold when large (positive or negative) external financing activities are present. Our study provides evidence that managers+ +normal+ operating decisions associated with net external financing activities are likely to lead to economically and statistically significant measurement errors in unexpected accruals. This is a serious concern given the frequency with which the partitioning variable used to identify instances of alleged earnings management is correlated with significant movements in net external financing. Simulation tests show that even at modest levels of net external financing changes, rejection frequencies for the null hypothesis of no earnings management rise dramatically